The Indian Government has always recognized the contribution of Senior Citizens towards nation building and thus has provided various concessions and special treatment to them. The Finance Act, 2021 inserted the Section 194Pofthe Income Tax Act, 1961 to further ease-off the tax burden of Senior Citizens. This provision relives the Senior Citizens from filing ITR upon the satisfaction of prescribed conditions.
In Union Budget Speech, 2021, the honourable finance minister started the direct tax proposals by presenting “Pranaam” to senior citizens and spelt out the very first direct tax proposal for Senior Citizens. The Ministry of Finance introduced the major direct tax relief to senior citizens from ITR filing in Union Budget 2021.
In this blog, we will critically discuss provisions of section 194P of the IT Act and its conditions in detail.
What does Section 194P contain?
Section 194P of the IT Act is a conditional exception of general rule of direct taxation enshrined under Section 139 of the IT Act.
Section 139 mandates every person whose total income exceeds the maximum amount not chargeable to income tax in a previous year to furnish return of income-tax (ITR) on/before prescribed due-date in a prescribed form and manner.
Section 194P of the IT Act basically provides conditional relief to the Specified Senior Citizens from the burden of filing ITR on the satisfaction of conditions prescribed therein.
The section 194P of the IT Act, 1961 shall be effective from 1st April’2021.
Conditions prescribed under Section 194P of the IT Act
The Section 194P(2) states that provisions of section 139 of the IT Act shall not be applicable on Specified Senior Citizens on the satisfaction of following prescribed conditions
- That the Senior Citizen shall be a Resident of India.
- That the Senior Citizen shall be of age 75 years or more at any time during the Financial Year under consideration.
- That the Senior Citizen shall be having income of the nature of either pension or interest from the account maintained in a specified bank.
- Such pension or interest income shall be either received or receivable from the account maintained by him in the specified bank only.
- That the senior citizen shall provide a declaration containing above particulars to the specified bank, in a prescribed form and manner within due time.
- That the Specified Bank shall have deducted TDS on account of such senior citizen as per section 194P(1)of the IT Act.
- That the Specified Bank shall be any banking company, which is specified by the Central Government in the Official Gazette.
Consequently, when all these conditions are satisfied then such senior citizen shall not be required to furnish return of income-tax return as per provisions of Section 139 of the IT Act.
Critical Analysis of Section 194P of the IT Act
- The section does not specify that what interest income from bank shall contain. That whether it contains all kinds of bank accounts such as saving account, fixed account etc. However, in the absence of any explanation we can interpret that it contains all types on interest income received or receivable from bank.
- Secondly, the provision mandates specified banks to deduct TDS at prescribed rates. However, it does not clarify that how such TDS shall be deducted. Therefore, we can expect that the government might issue the detailed guidelines to the banks on the practical application of this provision.
- Next, the provisions of section 194P of the IT Act has also failed to prescribe the time when such TDS shall be deducted. Therefore, we can also expect that the government will issue guidelines in the form of clarification for this as well.
- On plain reading of section 194P of the IT Act, we can say that “yes” the provisions of this section gives income tax benefit to the Senior Citizens who are of age 75 or above.
Section 194P of the IT Act has been inserted to give benefit to the Specified Senior Citizens by reducing the direct tax burden from them.
This provision exempts the senior citizens from filing ITR when the prescribed conditions are satisfied. However, there are many points which have not been clarified in section194P of the IT Act, so the eyes of Specified Banks and Specified Senior Citizens is on the Finance Ministry to release a guidelines or clarification in order to make this provision successful.
Income Tax Benefits Available To Senior And Super Senior Citizens
Residential Status of Individual for Income tax
Income from House Property under Income Tax Act, 1961